Directors' discretion to refuse share transfers must be exercised bona fide and on transferee-specific grounds, not blanket policy.

Where articles of association allow directors to refuse registration of a share transfer only if they do not approve of the purchaser, that discretion must be exercised bona fide, in the interests of the company, and on grounds personal to the proposed transferee. A refusal based on a blanket policy against corporate shareholders, or on considerations unrelated to the particular transferee, falls outside that contractual standard. The stated principle is that the power is directed to assessing the fitness of the specific transferee, not to imposing a general exclusion policy.

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Issues: Whether the refusal by the board of directors to register the transfer of shares was a proper exercise of the discretion conferred by the articles of association.

Analysis: The transfer could be refused only if the directors, acting bona fide and in the interests of the company, disapproved of the particular transferee for reasons personal to that transferee. The refusal in this case was not founded on any personal objection to the proposed transferee but on a blanket policy against admitting any corporate body as a shareholder and on apprehended consequences under section 43A of the Companies Act, 1956. That consideration was held to be irrelevant to the contractual standard in the articles, because the power of approval was not a general power to exclude all corporate bodies but a power to consider the fitness of the particular transferee.

Conclusion: The refusal to register the transfer was not a proper exercise of the directors' powers and the appeal was dismissed.

Ratio Decidendi: Where articles empower directors to refuse registration only if they do not approve of the purchaser, the discretion must be exercised bona fide on grounds personal to the proposed transferee and in the interests of the company, not by applying a general policy unrelated to the particular transfer.

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